Arnold Kling  

Tuesday, December 9 on Capitol Hill

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I received this from Congressman Henry Waxman:


Dear Dr. Kling:

I am writing to request your testimony at a hearing on December 9,2008, at 10:00 a.m. before the Committee on Oversight and Government Reform. The hearing will examine the financial collapse of Fannie Mae and Freddie Mac, their takeover by the federal government, and their role in the ongoing financial crisis.


An attachment reads,

At the hearing, each witness will be asked to summarize his or her written testimony in five minutes or less in order to maximize the time available for discussion and questions.

Given what I have written on this blog and elsewhere, I probably have over a hundred pages worth of material. Narrowing down what I want to say in writing is going to be hard enough. Whittling that down to five minutes will require a lot of discipline.


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COMMENTS (32 to date)
Dave writes:

Power to the blogosphere! Volcker and Goolsbee should hire you on for a bit...

Tom Church writes:

Be sure to let us in on your prepared five-minute speech. Sure it'll be tough to get it all down to five minutes, but considering what you've written so far, it'll also be illuminating.

Daniel Yokomizo writes:

Good luck, a week to summarize it is tough, but not impossible.

Buzzcut writes:

Congratulations! This is your big break. Knock 'em dead.

Jeff H. writes:

I summon the wisdom of crowds to let us know if and when this will be airing on CSPAN.

Nascent Grasp writes:

This is congressional testimony, not an opportunity to teach. Please stop worrying about condensing this complex topic and think about how your words will be used to justify policy you oppose.

stephen writes:

that's great arnold. i will DVR it on cspan.

Mr. Econotarian writes:

Good luck! I think you are one of the few people that have a grip on the causes of the (extremes of the) real estate bubble.

I hope you don't become the scapegoat though! That's always a risk when you show up to something like this.

Kevin writes:

Don't go. If they ask you any questions to which you provide wrong answers, you may go to jail. It's not like they will listen to you anyway.

Luke G. writes:

That's great! The tough part will be condensing it, I'm sure.

Congrats, Arnold.

However, I am concerned that Nascent Grasp's cynical view has some truth to it. I'm curious as to what the purpose politicians have in inviting people to testify.

Do they really want to learn?

Or is their mind already made up on the issue (based on what they think will be politically expedient), and want to make it appear that people from different perspectives are given a chance to voice their views, even if they are ignored?

Surely someone has written about this and/or researched such an issue?

In any case, if anyone is to testify, I'm glad it's you.

David Peterson writes:

It's about damn time. You have definitely presented some of the best stuff on this subject.

Will you bring up the global real estate boom at all?

Michael writes:

Give 'em hell, Dr. Kling!

David R. Henderson writes:

Dear Arnold,
Congratulations. Remember to start out by saying, "I request that my written testimony be entered into the record as if spoken." The chair will then say yes, and that way you get to wing it a little if the things people have said before you motivate you to add anything or say anything differently. Then when the record is printed, both your written testimony and your oral testimony are in it.
Best,
David

Les writes:

Arnold:

Five minutes is absurd. Most of them have the attention span of a fruit fly. But the rest of them really need to hear what you say.

So tell them as simply as you can. Good luck!

I assume that everyone who writes out hypothetical Congressional testimony is later invited to testify before Congress. That is the way it works, right?

Just keep it simple and the questions and discussion after should allow you to elaborate.

Let the 5 min summary provoke questions that you want to address, e.g., somewhere in your 5 min talk, say something like " . . . if we look closely at the current crisis, we'll see that deregulation played little if any role . . ." and leave it at that and move onto your next conclusion or point. They'll definitely want you to elaborate on that! :)

Good luck -- it's a great opportunity to give the free-market viewpoint a voice and exposure.

Alex J. writes:

Congratulations. I wonder if this actually will make a big step up in terms of influence? Presumably, you have some influence in the first place, that's what got you invited. I honestly don't know how much Representatives actually digest this kind of testimony. I suppose more publicity is at least no worse than less.

use catchy, but pithy, metaphors and hope one gets picked up on a news program can cut into a 30 second story.

"Expanding Fannie's mission to poor credit risks was like giving Plaxico Burress a gun; he shot himself but all of New York suffers."

"FM and FM's leverage ratio was as crazy as a Walloon drinking surplus Kentucky moonshine".

"If we don't get the taxpayers out of this business, FM and FM'll be panhandling taxpayers again as sure as the next candidate for president will promise an era of nonpartisanship"

Bonus points for nonsensical platitudes, say: "Fannie needs a swift kick in the... well you get the point Mr. Chair".

If you follow D. Henderson's advice, this won't go into your permanent record.

Dr. T writes:

"Whittling that down to five minutes will require a lot of discipline."

My recommendation about the invitation: Just say no. No one can squeeze a worthwhile presentation on this topic into a five minute slot. This will just be a mechanism for Congresspersons to appear 'serious' about the economy by listening to dozens of experts and asking lengthy, inane questions (that contain sound bites for the voters back home). Does anyone believe that Congress will make wiser decisions after these sessions?

El Presidente writes:

I will watch and enjoy the show. I think you're up to the challenge. Explain it simply, and let them make it complicated if they choose to. That way they'll get wonkish before you do and you'll have some control of the conversation. They can't afford to flank you on your academic side. They'd lose the debate and look out of touch simultaneously. Keep a sense of humor too. If you can make them chuckle you'll win their attention.

Grant writes:

Brian T. Schwartz,

However, I am concerned that Nascent Grasp's cynical view has some truth to it. I'm curious as to what the purpose politicians have in inviting people to testify.
I believe the most likely answer to this is that they are trying to signal to voters that they are competent problem solvers, and are willing to listen to experts. Obviously if they wanted to learn, they could read (or have their aids read) Arnold's testimonies here. Asking Arnold questions over the Internet is likely easier than at a time-constrained hearing (he's even answered some of my questions, and I'm just some random dude on the Internet with no last name).

That said, this seems like a wonderful opportunity for Arnold to spread his ideas to a wider audience. Maybe you can't teach congressmen, but you might be able to teach a few viewers.

vjwpalc writes:

As you've done a wonderful job pointing out, in real life, the regulatory environment has led to a situation in which risky securitization practices were artificially favored relative to plain vanilla hold-to-maturity lending practices.

This is a key insight that has gotten some attention from you, but almost NO attention from anyone else that I can think of. Your earlier "Fantasy Testimony" post was very compelling and interesting. The credit crisis is pretty much the only news I even follow these days, and you, so far, are the ONLY person to make a clear and persuasive argument that (quoting you) "if Method B were to compete fairly with Method A in a market test, Method B would fail. To survive against Method A, Method B requires government favors and subsidies. It always has, and it always will."

It's quite likely you'll be the only person to testify before congress who can make this case.

vjwpalc writes:

By the way I can't wait to watch your testimony. If your GMU radio appearances are any indication, you are a superb speaker.

drtaxsacto writes:

What could be annoying is that Congressman Waxman may not really want to listen to you even if you summarize your comments down to five minutes. He is a showman not really interested in thinking about these issues. Proceed with caution.

Unit writes:

Don't pull an Aviator-like testimony...just kidding.

I wonder if you can formulate a practical proposal on the way forward. They seem to be at their wits' ends on what to do now. They might not be too interested in a lecture focusing only on their past mistakes. 5 mins is really short, can you use power-point? :-)

Brad Hutchings writes:

What an honor! Make sure you don't travel to Washington on a private jet. Diamond earrings or cufflinks are probably out. Shout outs to your bloglits will probably confuse the congressmen and the general C-Span audience.

But seriously, your Fantasy Testimony is timeless. As rapidly as the bailout appeared and is evolving, it reads today like it was written today, not two months ago. You could mix in the point about the GSE's having leverage due to the implicit government guarantee, which was exercised. You could then extend this point to suggest this paved the way for all sorts of bailouts of entities that enjoyed no implicit guarantees, from AIG to the automakers. Moral hazard isn't just an abstract theory or boogeyman. It is playing out in spades.

SheetWise writes:

It will be great to have, on the record, the knowledge that our Congresscritters have actually been presented a reasoned analysis. OTOH -- I predict that in the end they will conclude that every child should have a pony.

Daublin writes:

Does anyone know if it will be on CSPAN? I'd love to watch.

As for what to say, it's good to be aware of all the devious things going on in politics, but often your best strategy is still to play straight and say what you think is the right thing to say. If you get caught exaggerating something, opponents will not need to twist your words around. They'll just take you down straight out.


That said, it seems like the "right" thing for a congressional testimony is to think about what you'd want congressmen to understand after talking with you for five minutes. They aren't going to become economists, but they do need to make important decisions. Ideas:

1. Talk policy. Shrink the FM's in the long run. Let the bad banks go under. BB&T's CEO begged Congress not to bail out banks. Stop crying panic, because it's creating a run on the economy.

2. Expose the political aspects you are aware of. You've also mentioned some kinds of financial markets being about "liar's poker". I don't fully follow you but that sounds like something Congressmen would understand perfectly.

3. Point out interesting theories being unvoiced. The financial sector is too large. Since it's too large, it might not have a terribly large effect on the real economy.

4. Ask them to embrace the question of what to do when even our brightest economists do not really know how finance works. Probably we need to play carefully and *calmly*.

I guess that's too much for five minutes. I don't envy you having to pick and choose what to say before the U.S. Congress. Oh, except wait, that's totally awesome. Congratulations, Arnold! I look forward to hearing what you decide.


Larry writes:

I recommend selecting one idea on a hot topic and ramming it home convincingly, rather than trying to summarize the enormously wide-ranging ideas that keep me returning to your site day after day. Give them something they haven't heard before.

Entertain provocatively without joking. Don't annoy, self-congratulate or bash other panelists or interlocutors.

You only get one chance to make a first impression.

Dan Weber writes:

Are you allowed to bring visual aids, Ross Perot-style?

Maybe just a few placards, saying:

"FINANCE IS TOO BIG -- SHRINK IT"

"FANNIE AND FREDDIE ARE TOO BIG -- SHRINK THEM"

"TRADITIONAL LOANS -- 20% DOWN, FIXED RATE"

More than three and you'll probably lose them.

mobile writes:

Just don't use your private jet to get to Washington and everything will be fine.

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